Abstract:
The purpose of this study is to investigate the impact of board governance practices
on capital structure decisions with the moderating effects of gender diversity. The
research methodology constitutes panel regression analysis between board
governance attributes and capital structure decisions; further moderation is tested
with the gender diversity of listed companies in Sri Lanka from 2016 to 2020. 100
listed companies representing food, beverage and tobacco, capital goods, material and
consumer services sectors in Sri Lanka were considered as a sample. This study
focuses on the five aspects of board governance practices such as board size, board
composition, CEO duality, board meeting and audit committee while capital structure
decision is measured based on the long-term debt to total assets. The findings
demonstrate that the issue of gender diversity has important implications for the
capital structure decisions of the listed firms in Sri Lanka. When interacting with a
high level of gender diversity, board governance characteristics are more likely to
have a significant impact on firms' capital structure decisions. Board composition
unveils a negative effect, and interaction between board composition and gender
diversity significantly impacts firms’ leverage level. A negative effect is observed
when the chief executive officer of a company also serves as the chairman of the
board of directors. The effect of the audit committee turns from a positive to a
negative effect when women participation on the board increases. This study offers
evidence to the corporate sector about the inclusion of female representation in
boardrooms, which may further increase transparency and attract capital, particularly
debt. This study recommends improving monitoring processes and introducing and
examining new methods that can help businesses to draw in greater resources and
create an optimal capital structure. It would also assist policymakers in determining
the sufficiency of available board governance reforms to improve capital structure
balancing.
